How does the internet make money?

OK, so I am stupid

 

How does the internet make money?

 

Sites like facebook are worth millions

Google is worth Billions

 

But how did these companies make so much $$$

 

I know they carry advertising, but I rarely click on a link, and have never bought anything from a linked site

I would be amazed if these linked sites sell enough to warrant advertising on sites

 

I would have assumed that most people are the same

Or do these companies make their $$$$$ from the 0.1 % of people who are simply naive, ignorant?

Ad revenue pure and simple.

 

Websites like Facebook and Myspace generate millions of pages views per day all over the world - big companies want to get on this band wagon, some even pay for page views not clicks, or a flat rate per month.

 

Oh, and porn.

Which ask the same question, 'who is stupid enough to pay for porn?'

Which ask the same question, 'who is stupid enough to pay for porn?'

 

For all us who get it free there are a few simpletons to actually had to pay to get access to the stuff originally...:lol:lol

doco on sbs on friday night asked the same questions there is a web site called pornotube and it has 40 billion hits each month. same deals as youtube with vids and stuff for free but they make a killing on the ads if a ad shows they get like .001 cents and a percentage if they buy from link

OK, so I am stupid

 

How does the internet make money?

 

Sites like facebook are worth millions

Google is worth Billions

 

But how did these companies make so much $$$

 

I know they carry advertising, but I rarely click on a link, and have never bought anything from a linked site

I would be amazed if these linked sites sell enough to warrant advertising on sites

 

I would have assumed that most people are the same

Or do these companies make their $$$$$ from the 0.1 % of people who are simply naive, ignorant?

 

 

Companies like Facebook and Google are not really worth what the market is paying in my opinion. As you pointed out, it doesn't seem like the value of advertising would be enough to carry them. Oh, they make money alright, but their price to earnings ratio is laughable. I'm surprised one or both havent been offloaded cheap after the events of the last couple of years.

 

So simply put, those two companies made a lot of money by floating on a sharemarket. Their share price is high, but with little intrinsic value, unlike say shares in BHP. If they were still private companies, they wouldn't be worth 10% of what they are now, even if they were the same size...

Companies like Facebook and Google are not really worth what the market is paying in my opinion. As you pointed out, it doesn't seem like the value of advertising would be enough to carry them. Oh, they make money alright, but their price to earnings ratio is laughable. I'm surprised one or both havent been offloaded cheap after the events of the last couple of years.

 

So simply put, those two companies made a lot of money by floating on a sharemarket. Their share price is high, but with little intrinsic value, unlike say shares in BHP. If they were still private companies, they wouldn't be worth 10% of what they are now, even if they were the same size...

 

That is what I thought

'we think we are worth $xxxx because lots of people use our site'

That is what I thought

'we think we are worth $xxxx because lots of people use our site'

 

Close, it's not Google or Facebook who are saying they are worth that (or whichever company owns them now) but rather people who buy shares in them. I'm pretty sure Facebook was bought by another company. So say when they listed on the stock exchange they offered 1 million shares at $1 each on the basis that they expect to make X amount of dollars per year.

 

After a little while, almost purely because of hype, the shares might now be traded for $50 each. Facebook didn't set that price, it's just what people are willing to pay, Including bigger companies. NORMALLY, this sort of behavior creates what they call a bubble. Suddenly, everyone realises (normally because all of a sudden they don't have as much money to throw away) that 'hey, no way is this worth 50 bucks a share'. Everyone starts selling, and the price drops dramatically. I'm really surprised both of them haven't been sold off for peanuts recently...

 

edit: here we go, Facebook isn't officially listed, but some individuals have bought shares in them:

 

http://en.wikipedia.org/wiki/Facebook#Financials

 

If I were the creator, i would sell it for as much as Microsoft or whoever wants for it. Then point and laugh :laugh:

Read the Google Story (book) and you'll get a better understanding. Yes Google make millions from advertising but they also make millions from technology. They employ hundreds of propeller heads who think up new ways to do stuff every day and they patent it. Google sells it's search engine to companies all over the world. The developers at my organisation come up with hundreds of patents each year (and that ain't cheap). Most of them have absolutely nothing to do with any part of what our organisation does but the patents keep the $$$'s rolling in.

quote=Pop Bumper Pete;342052]Which ask the same question, 'who is stupid enough to pay for porn?'

 

are you calling me stupid?:laugh:

Read the Google Story (book) and you'll get a better understanding. Yes Google make millions from advertising but they also make millions from technology. They employ hundreds of propeller heads who think up new ways to do stuff every day and they patent it. Google sells it's search engine to companies all over the world. The developers at my organisation come up with hundreds of patents each year (and that ain't cheap). Most of them have absolutely nothing to do with any part of what our organisation does but the patents keep the $$$'s rolling in.

 

yes and no. for example:

 

Microsoft earnings per share for this year is $1.62, last price for shares was 28.52. thats a ratio of 17.6. Plus they are giving a dividend of 52 cents this year.

 

Google earnings per share is $14.27, last price was $551. Thats a ratio of 38.6, that is to say, in proportion they are making HALF what Microsoft are! Plus, no dividend from Google.

 

Smoke and mirrors, my friend...

Whats the difference between Google, and a newspaper or television network.

 

The papers and stations provide content that they think will attract viewers, which they can then use to charge people to advertise. Grand finals and big events attract advertising premiums as more people see the adverts that are on in that time period.

 

Now, google, is pretty much THE search engine. If your looking for something on the net, the chances are your using google to look for it. The biggest newspaper or television station in the world can't compete with the daily numbers of google or facebook. If you have a product that appeals to many countries, then it makes sense to advertise with a company that can deliver your message to your demographic.

 

Although Google does not have a mass of machines and stock it can liquidate, other than servers etc, they do have massive numbers of people that they can generate advertising income from. I can't see that changing any time soon.

isp's make money out of us cos we pay a monthly subscription to have the net connected

 

hope that helps

Now, google, is pretty much THE search engine. If your looking for something on the net, the chances are your using google to look for it.

Even if you are not using their site chances are the site you are using is 'powered by Google'. Most are these days.

Whats the difference between Google, and a newspaper or television network.

 

 

 

 

Google earnings per share is $14.27, last price was $551. Thats a ratio of 38.6, that is to say, in proportion they are making HALF what Microsoft are! Plus, no dividend from Google.

 

Time Warner earnings per share is $1.53, last price was $31.01. That's a ratio of 20.26. Plus 37.5 cents dividend.

 

I can't stress enough that in the end corporations are about making money. The difference is basically what Viper said, Google is about selling intellectual property, and advertising. A traditional media company is about selling news. In proportion, it looks like traditional media are still the better investment

 

Another way of looking at it is that the difference is Google is overpriced compared to Time Warner. If their share price halves, it would be more reasonable, if they start giving out dividends.

 

For those that arent into shares, i should point out that as a shareholder, you dont see that Earnings Per Share per se. Higher earnings tend to translate into higher dividends though. Looking at Google shares (I've been using the NASDAQ site) it looks like they've NEVER paid a dividend. They are relying on sharemarket speculation to keep their price moving up. In the long term that's not good. Speculation is for 'penny dreadfuls' like mining exporation start ups etc. NOT multi billion dollar corporations...

Like this?

 

 

http://www.youtube.com/watch?v=60og9gwKh1o"]http://www.youtube.com/watch?v=60og9gwKh1o

 

ffs lol

 

http://www.youtube.com/watch?v=3609OtM138c&feature=PlayList&p=0034DBFD48F2D150&index=8"]http://www.youtube.com/watch?v=3609OtM138c&feature=PlayList&p=0034DBFD48F2D150&index=8

 

But maybe this explains it:

 

[video=youtube;4e-VDXhXPSE]http://www.youtube.com/watch?v=4e-VDXhXPSE"]http://www.youtube.com/watch?v=4e-VDXhXPSE

The difference is basically what Viper said, Google is about selling intellectual property, and advertising. A traditional media company is about selling news. In proportion, it looks like traditional media are still the better investment

 

Ah but are they? The news as it is stated, is nothing more than a neatly organised package of stories that have been hand selected from many possible stories that could go in to any paper or broadcast. Hand selected because that particular story is going to appeal to the broadest group of people and get the most viewers. Viewers that are going to allow us to sell advertising.

 

Hence all you hear about is murder, bank robberies and bashings with a nice little tale about a kitten rescued from a storm water drain at the end. Or why A current affair constantly covers dodgy tradesmen, shonky real estate agents and dole bludging bums. It gets the bums on seats for the advertising.

 

If News was about the news you wouldn't see ads in the paper.

 

It amazes me that the murdoch group (I think) are seriously looking at charging people to look at online news. Talk about being out of touch with their audience.

Advertisers are also alot more likely to pay because of how honed the advertising can be.

 

I advertised a gig of ours on FaceBook just to try it out. And was blown away by the customisation and focus offered. You could advertise to (for example):

 

Single Women aged 18-21 who are fans of Guns n Roses and Live Music and live in Brisbane

 

When you know you won't be paying for your ad to be wasted on the wrong demographic, that value of 1 "Display" of that ad is worth alot more.

 

Let's not also forget the intrinsic value of knowing just about EVERYTHING about just about EVERY 15-30 year old person in the developed world through FBook...

Ah but are they? The news as it is stated, is nothing more than a neatly organised package of stories that have been hand selected from many possible stories that could go in to any paper or broadcast. Hand selected because that particular story is going to appeal to the broadest group of people and get the most viewers. Viewers that are going to allow us to sell advertising.

 

Hence all you hear about is murder, bank robberies and bashings with a nice little tale about a kitten rescued from a storm water drain at the end. Or why A current affair constantly covers dodgy tradesmen, shonky real estate agents and dole bludging bums. It gets the bums on seats for the advertising.

 

If News was about the news you wouldn't see ads in the paper.

 

It amazes me that the murdoch group (I think) are seriously looking at charging people to look at online news. Talk about being out of touch with their audience.

 

 

I think you might be missing my point about corporations having to make money. As I've pointed out already, Google really doesn't make much money in proportion to how much is invested in them. In the long term, that is untenable. Philosophical discussions aside, it's 'All about the Benjamins'...

Ah but are they? The news as it is stated, is nothing more than a neatly organised package of stories that have been hand selected from many possible stories that could go in to any paper or broadcast. Hand selected because that particular story is going to appeal to the broadest group of people and get the most viewers. Viewers that are going to allow us to sell advertising.

 

Hence all you hear about is murder, bank robberies and bashings with a nice little tale about a kitten rescued from a storm water drain at the end. Or why A current affair constantly covers dodgy tradesmen, shonky real estate agents and dole bludging bums. It gets the bums on seats for the advertising.

 

If News was about the news you wouldn't see ads in the paper.

 

It amazes me that the murdoch group (I think) are seriously looking at charging people to look at online news. Talk about being out of touch with their audience.

Now that sounds like an accuratly described conspiracy:D